Europe’s troubles affect wide variety of U.S. firms

From manufacturers in the Midwest to upscale retail shops in Manhattan, a wide variety of American companies are feeling the pinch of Europe’s economic contraction, helping to hold back recovery in the United States.

Ford, the iconic U.S. car company, says that Europeans are not only buying fewer cars but also replacing fewer parts. Kraft Foods, which is behind such brands as Swedish Fish and Dentyne, says sales of candy and gum in Europe are lagging. And jeweler Tiffany & Co. says fewer European tourists are shopping at its flagship Fifth Avenue store.

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Europe is suffering a financial crisis, fueled by dwindling investor confidence in the debts of such countries as Greece, Portugal, Spain and Italy and a beleaguered banking sector. In the United States, analysts are worried less about the financial system and more about the impact on companies outside Wall Street.

For companies in sectors such as food, apparel, hotels and technology, sales and profits will lag if the European crisis does not ease. The effect is direct, as Europeans buy fewer U.S. products and services, and indirect, as Europe’s crisis creates financial uncertainty in the United States and slows economic growth, leading American consumers and businesses to pull back, too.

“The crisis in Europe has affected the U.S. economy by acting as a drag on our exports, weighing on business and consumer confidence, and pressuring U.S. financial markets and institutions,” Federal Reserve Chairman Ben S. Bernanke said Thursday.

The problems in Europe add to the reasons that big U.S. companies, despite record profitability, haven’t revved up domestic hiring enough to bring the unemployment rate below 8 percent. Other factors include the lingering wounds in the U.S. economy from the financial crisis and recession, as well as fears that the economy could dip back into recession if automatic tax hikes and sharp spending cuts take effect at year’s end.

The auto sector and its suppliers are among the most exposed to Europe’s problems.

“It’s a really, really tough environment,” Ford chief executive Alan Mulally said recently, comparing the auto business in Europe to conditions in the United States in 2008 and 2009, just before the auto bailout. “We’re not just seeing this on the new-vehicle side, but we’re seeing consumers, who are coming in for service, they’re not coming in as much and they’re not spending as much.”

American companies vulnerable to Europe’s slowdown have already begun to significantly roll back overhead. Staples, the Framingham, Mass., office-supply chain, reported lower sales, particularly of computers, in Europe this year and laid off hundreds of overseas employees.

“We expect trends in Europe to remain challenging,” Staples president Michael Miles said last month. “We’ll remain, and continue to be, consolidating business units, centralizing functions and reducing layers in complexity with an eye toward lower costs and better execution.”

Goodyear Tire & Rubber, based in Akron, Ohio, said that owners of consumer and commercial vehicles in Europe were buying fewer tires and dealers were selling out less frequently as a result.